Shares snap losing streak as focus turns to earnings

Australian equities snapped a six-day losing streak on Monday as investors followed Friday’s gains in the US on receding concerns of Russian aggression in Ukraine and clarity on US ­air strikes in Iraq.

The benchmark S&P/ASX 200 Index closed up 21 points, or 0.4 per cent, at 5457.0 points, while the broader All Ordinaries Index climbed 0.4 per cent to 5449.4.

It was the first daily gain since July 31, after which a mixture of geopolitical jitters and renewed speculation about the timing of monetary tightening in the US weighed heavily on risk assets for most of last week.

Local investors also took their cue from the Reserve Bank of Australia’s downward revision of growth and inflation forecasts on Friday.

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Markets around the region rose on Monday, led by Japanese stocks, which posted their biggest one-day jump in four months, with the Nikkei gaining 2.4 per cent to 15,130.52.

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The index recouped most of its steep losses suffered on Friday, boosted by a slight drop in the yen and amid reports that the nation’s giant pension fund has temporarily removed a cap on local stock investments.

Credit Suisse equity strategist ­Damien Boey said the share sell-off on Friday appeared to be linked more to US President Barack Obama’s approval of selective air strikes on Islamic extremists in Iraq.

Now that markets had recovered their composure on geopolitical events, the focus in Australia would return to economic fundamentals, he said.

Lower inflation forecasts suggest further monetary easing by the RBA, which should support shares.

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However, sluggish economic growth meant some shares still looked over­valued, he said.

“The key issue is how big you think the equity risk premium is, as in the expected return on equities versus bonds," Mr Boey said. “And I have a lot of sympathy for the view that the risk ­premium is very low.

“You get some bad news anywhere, and the butterfly flaps its wings, and suddenly you get quite a severe reaction in the [share]market because of the price of risk.

“How do you digest this new future, where we have fairly mediocre growth but bond yields are moving all over the place?"

Bendigo and Adelaide Bank
was one of the day’s winners, closing up 2.3 per cent at $12.46, after beating market ­estimates of its financial year profits.

The big four banks were mostly higher, apart from
Westpac
, which slipped 0.2 per cent.

Online real estate advertiser
REA Group
was the market’s best performer, up 5.2 per cent to $45, on a series of analyst upgrades for the financial year ahead.

Credit Suisse, which upgraded the stock from “neutral" to “outperform", said the company provided a buying opportunity after a “surprising" 8.7 per cent fall in the share price last week.

G8 Education
, Australia’s largest-listed childcare group, was also among the day’s big winners, closing up about 2.8 per cent at $4.91 after unveiling strong sales growth.

Treasury Wine Estates
, meanwhile, ended up 3.9 per cent at $5.33 after it reported an additional, non-binding and conditional proposal from “another global private equity investor" to acquire all of its shares at $5.20 cash apiece. The company last week received a $5.20-a-share bid from Kohlberg Kravis Roberts and its junior ­partner, Rhone Capital, which itself was an improvement on KKR’s original standalone offer of $4.70 per share.

Among the losers was
JB Hi-Fi
, whose downbeat sales outlook took the shine off solid results. Shares plunged 7.9 per cent to $17.84.

Goldminers Resolute Mining, Beadell Resources, Medusa Mining, Regis Resource and Evolution Mining were also among the 10 biggest losers as the gold price shed a lot of its recent gains after the flight to safe haven assets was reversed. Australia’s biggest gold producer, Newcrest Mining, dropped 1.7 per cent to $10.99.

The price of gold was down 0.2 per cent at $US1307 in late local trade.

Resources giant BHP Billiton climbed 0.7 per cent to $38, while its main rival Rio Tinto ended ahead 0.74 per cent at $66.9.

The spot price for iron ore, landed in China, was at Friday’s close of $US95.7 a tonne.